U.S. investor groups slam proposed SEC, CFTC cuts

WASHINGTON Wed Feb 16, 2011 3:03pm EST

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WASHINGTON (Reuters) -Investor and consumer advocacy groups launched an assault against Republican efforts to slash funding for U.S. market regulators, saying the cuts will kill investor confidence.

The campaign unveiled on Wednesday aims to engage both institutional and retail investors in the debate by asking them to write to their members of Congress in support of greater funding for the Commodity Futures Trading Commission and the Securities and Exchange Commission.

The effort led by ShareOwners.org, the Council of Institutional Investors and the Consumer Federation of America, comes as Republicans take aim at federal spending across the board. In addition to concerns about the U.S. deficit, Republicans have questioned funding boosts for regulators due to concerns about provisions in last year's Dodd-Frank financial law, including new rules for over-the-counter derivatives.

Congress failed to finish its budget process for fiscal 2011 before the November election, leaving SEC and CFTC budgets frozen at 2010 levels. The flat budget has already forced both agencies to curb travel and hiring.

SEC Chairman Mary Schapiro and CFTC Chairman Gary Gensler have said that any potential cuts would have a major impact on their ability to implement Dodd-Frank and upgrade their outdated technology.

On Friday, Republicans in the House of Representatives proposed cuts to spending for the remainder of the current fiscal year, with the CFTC hit particularly hard.

House appropriators said they wanted to slash $56.8 million from the CFTC's current funding of $168.8 million for 2011, while the SEC's would be lowered $25 million from the current level of $1.1 billion.

The Obama administration called on Monday for large increases in both agencies' budgets for fiscal 2012 that begins October 1, bringing the SEC's budget to $1.427 billion and the CFTC's to $308 million.

The president's budge plan is already being criticized by some Republicans, especially because it calls for funding a portion of the CFTC's proposed budget with user fees on financial firms.

Executives from the three investor advocacy groups said on Wednesday they fear that budget cuts will prevent the SEC and CFTC from implementing Dodd-Frank and carrying out other regulatory responsibilities, such as a new SEC rule that would establish a fiduciary standard for brokers and investment advisers offering advice to retail customers.

The proposed budget cuts "are an invitation to disaster" for market integrity and investor confidence, said Tracy Stewart, the executive director of ShareOwners.org.

(Reporting by Sarah N. Lynch; Editing by Tim Dobbyn)

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